Magazine Article | August 1, 2018

Driving Customer Success Starts At The Top

Source: Software Executive magazine

By Matt Pillar, chief editor

Why ServiceChannel’s CEO is putting real dollars behind its customer success initiative, and how it’s poised to capitalize on customer demand.

Tom Buiocchi
Tom Buiocchi understands the difference between customer service and customer success. There is no nuance. The executive director and CEO at ServiceChannel has been leading his entire organization through a concerted exercise on the topic that began in earnest with the formation of a dedicated customer success organization in 2017. The genesis of that formation was based on a simple observation: Customers weren’t squeezing out of the product anything close to the value ServiceChannel developers were building into it.

ServiceChannel boasts more than 500 customers — primarily multi-site Fortune 1000 retail and hospitality companies — who buy its SaaS offering to manage their procurement of and relationships with service firms. Think window washers, carpet cleaners, plumbers, and such. A rudimentary comparison to Angie’s List can be made here, with the exception that ServiceChannel offers several sophisticated financial transaction, data collection, review, reporting, and dialog tools in its platform.

ServiceChannel’s ongoing usage analysis revealed that a significant percentage of its customers were using the product in a manner that Buiocchi characterizes as “almost rote in some ways, and not complete.” Recognizing that incomprehensive use of the platform was undoubtedly inhibiting customer results, ServiceChannel formalized its customer success initiative. “The analogy I always turn to is that Microsoft can sell you Microsoft Word, but they don’t teach you how to write a good article or paper,” he explains. “Similarly, our customers can buy ServiceChannel and use it all day, but it’s the experience and insights that are going to guarantee them cost savings and quality improvements at their sites.”

To address that disconnect, Buiocchi challenged the company to answer some key questions. What does customer success look like? What goes into account management? How is customer success “done,” and what kind of skillset is needed? “We sought to understand how to get customers to engage more comprehensively and thoughtfully with our solutions so they could drive the results they want out of the relationship,” says Buiocchi. “I’ve literally been living this for the past year.”

Reorganizing For Customer Success

To institutionalize customer success as a core discipline, ServiceChannel formed an internal organization that leveraged two distinct skillsets among its account management personnel. Doing so took a bit of shake-up in an effort Buiocchi characterizes as a case study in organizational behavior.

“We had a group of folks we call account managers, and it was what I might call a quasi-heterogeneous group,” he says. He explains that account managers could be roughly divided into two camps: Some are what he refers to in an endearing way as propeller heads — the type adept at helping clients figure out how to get a certain report, how to make the software do certain tricks, or how to use the software more efficiently. “This group is very, very technical and support-oriented,” Buiocchi explains.

The other group, he characterizes as commercially oriented. They’re motivated to get their customers to buy and use more ServiceChannel products and to use those products for more hours per day in hopes of setting the client retention hook a little bit deeper all the time.

As the reorganization took shape, this latter group of commercially oriented associates maintained its account management designation. “Account managers now serve exclusively as our customers’ primary focal points for expansions, upsells, and module additions, the more commercial account management activities,” says Buiocchi.

"Our customers can buy ServiceChannel and use it all day, but it’s the experience and insights that are going to guarantee them cost savings and quality improvements at their sites."

The “propeller heads” morphed into the core of the company’s newly formed customer success department, responsible for a combination of customer- facing training, usage, and data analytics work aimed at a singular objective: helping customers use ServiceChannel more effectively to achieve their goals. ServiceChannel veteran Michael Rivisto was sourced from within to lead this group as SVP of services and customer success.

Keeping The Customer Success Promise

The first major mission accepted by the ServiceChannel customer success team was to develop a tailored success plan for every single one of the company’s customers. This is no small feat given the volume of the company’s customer base, much less the variable nature of user engagement with the software. Motivation for ServiceChannel subscriptions run the gamut; discounters typically leverage the platform for straight-up cost savings through service procurement efficiencies. Luxury retailers find value in the platform’s contribution to the protection of their brand perception — they simply want their stores to function flawlessly and look even better. Still others seek to improve the experience of their store managers by removing a manual routine maintenance burden through a bit of service call automation.

"The greater the value they get, the more they’ll buy from us. ... The more new modules they use, the more they’ll trust us. We’ll get that back in expansions over time. It may sound a bit like a capitalist prayer, but that’s how we look at it.”

Buiocchi surmises that generally these myriad motivations can be placed in one of three buckets: cost, quality, and experience. But to effectively serve each constituent, ServiceChannel customer success associates must determine on an individual basis precisely what success looks like to each customer. To that end, the team set out to meet individually with decision-making stakeholders at each and every one of the company’s more than 500 customers to document their success benchmarks.

On the heels of those meetings, customer success and account management team members schedule out weekly meetings with their clients to assess and discuss the KPIs and benchmarks identified by specific customers and to monitor progress toward their goals. Common benchmarks in the cost bucket include average service call invoice amount (continuously seeking reduction) and adherence to facilities maintenance budgets. In the quality bucket, Service- Channel measures performance characteristics of the contractors that do work for its retail customers, such as what percentage of times the contractor acknowledges work order requests in less than two hours, shows up on time, completes the job in one visit, and invoices in 30 days or less. In the store manager experience bucket, ServiceChannel measures things ranging from the services provider’s adherence to SLAs (Were they able to get a contractor to come in? Was he on time? Did it take more than 15 minutes?) to whether the manager was able to use their mobile app to facilitate the service call.

These customer-specific KPIs are benchmarked, and the customer success team assumes responsibility for shepherding their improvement. “We’ll track and graph these metrics quarter by quarter and show our customers from week to week where they’re making progress and where they’re not,” says Buiocchi. But ServiceChannel customer success associates don’t leave the making of that progress in the hands of the client. The company advises its customers on behavior modification and services provider penalty strategies to drive improvement. “Some customers, for instance, require services providers to check in and out using their mobile phones to monitor the duration of the service call. If the services provider doesn’t comply, they’re short-paid 5 percent,” explains Buiocchi.

Affirmation: Net Retention Improvement

ServiceChannel is a slave to net retention, and Buiocchi says that’s where the fruits of its customer success efforts appear. The equation is quite simple: customer’s current usage plus upsell minus churn. “Everything that we want to do is tied up into that metric,” says Buiocchi. “We obviously want to retain as many customers as possible, and our belief is that the more they interact with our product, the more likely they’re going to stay over time. The less interaction with and value received from our product, the higher the risk they’ll leave.”

What sounds elementary is a boardroom staple at ServiceChannel. Buiocchi presents the company’s upsell and expansion business in every board meeting, juxtaposed with its churn statistics. “That’s the key metric that our board looks at from a health of the business standpoint — whether we’re getting more business than we’re losing,” says Buiocchi. “Net retention over 100 is good, obviously. Hitting the 115-to-120 range is best-inclass, and that’s where we try to maintain.”

Asked if ServiceChannel can attribute its best-inclass net retention metric to its customer success initiative, Buiocchi hesitates. “It’s probably a little bit of a stretch, but I think it’s a reasonably straight line,” he says. “The company’s been around for a long time, and this customer success experiment is a little bit out of school. In the early days, the focus was predominantly on attracting new customers, and not as much on nurturing existing customers.” Point being, high net retention figures can be deceiving during periods of rapid new customer acquisition. Those metrics are much more telling now that the company is as focused on nurturing platform usage among existing customers as it is on selling new accounts. “We’ve got more of a 50-50 split on that now. The customer success effort is fairly recent, but our net retention numbers continue to get better,” says Buiocchi. “Is it cause and effect? Are there other factors involved? Surely, but it appears to be working.”

Should Software Consultation Be Monetized?

At its face, the consultation work that ServiceChannel customer success associates are doing isn’t directly billable. Consultancy is a business model Buiocchi wants to avoid. “I think 2 or 3 percent of our revenue is services. The rest is software license fees,” he says. “We don’t want to become a body shop where we have thousands of consultants running around.”

Still, the consultative aspect of customer success is necessary because the company’s customers demanded it, to the point that Buiocchi says the demand was “hitting us over the head like a hammer.” He offers an anecdote. “We had a very large, five-year customer come to us last year to tell us that our software was so good, it was automating some of their bad habits. They weren’t getting the results they wanted, so they came to us for help.” ServiceChannel’s initial reaction came with a healthy dose of tough love. “We said, wait a minute, we’re providing you a software tool. It’s not our job to run your business,” recalls Buiocchi. “They said, no, no, you don’t understand. You have 500 customers. You’re able to see what works. You’re able to see what doesn’t work. We need to know the best practices and the worst practices.” That was the “aha” moment, or as Buiocchi puts it, the hammer over the head. That request for a consultative experience to tell a client where they were going wrong catalyzed the customer success initiative at ServiceChannel. “Our customers could keep doing the same thing they’d been doing with ServiceChannel for years and continue making some legacy bad habits really efficient and automated. Or we could step in to provide some guidance from a behavioral standpoint, and we could learn from that process, too.”

Buiocchi admits that in these early stages, the longterm payback on the company’s customer success experiment is hypothesis, but the premise is simple. “The greater the value they get, the more they’ll buy from us and the longer they will stay engaged with us. The more new modules they use, the more they’ll trust us. We’ll get that back in expansions over time. It may sound a bit like a capitalist prayer, but that’s how we look at it.” It’s a rare theory in which capitalism and altruism aren’t at odds, but it seems to be working for ServiceChannel.

The Rarity Of Customer Success Talent

As customer success continues to gain a head of steam as a business discipline, the talent pool is beginning to deepen, with some caveats. Service- Channel Executive Director and CEO Tom Buiocchi, who chalks up sub-par talent and experience as the greatest detriment to serving high-demand clients, sets a pretty high bar for his customer success associates. Technical proficiency comes first. “It’s hard to make someone really successful with your product if you don’t know how to use it like a master. You can’t use it peripherally. You’ve got to use it like you’re the genius of that product,” he says.

Next, ServiceChannel looks for a tie to the retail industry it serves. If it hires lawyers and asks them to become experts in ServiceChannel and facilities maintenance, they can learn how to use the product but they’ll have no sympathy to the customer and what makes that customer successful. “We tend to look for people that have some industry tethering, adjacency, or experience and who have a technical aptitude as well.” To that end, the company has had particularly good luck hiring ex-retail employees who have been ServiceChannel users.

Finally, Buiocchi stresses that customer success reps must have an empathetic personality. That’s a big deal because you could find software gurus all day long who are bad customer success people. “Vertical experience, the knowledge of how our product sings, and some EQ, that’s the perfect combination,” he says. “But the challenge is you have to be a bit of a decathlete. You’ve got to be able to do a lot of things.”